Bookkeeping - Question about accruals and assets

[Hassan]

Hi all,

I've a bookkeeping question, I would really appreciate if someone could help me.

Let's say it's Feb'15 and I have received a bill of £9,000 for an online magazine subscription. The due date for the bill is 15th of February and it's for a period of Feb'15 to Apr'15. We use accrual method of accounting and we close our accounts on monthly basis. Please advise if below entries are correct to record transactions:

On receiving the bill (1 Feb)
Dr. Asset 9000?
Cr. Liability 9000

Every Month End:
Dr. Accrued Expenditure 3000
Cr. Asset 3000??

On payment:
Dr. Liability 9000
Cr. Cash 9000

If yes, please advise appropriate account name for the "Asset"?

If no, please advise correct entries.

Thanks

 

[Triest123]

Feb -15
Dr Magazine fee ($9000/3) $3000
Dr Prepayment $6000
Cr Bank $9000

Mar -15
Dr Magazine fee $3000
Cr Prepayment $3000

Apr -15
Dr Magazine fee $3000
Cr Prepayment $3000

 

[Hassan]

It becomes a prepayment once we have paid the bill but what will be entries if we need to only record the bill?

Let's say we will pay the bill in April but we need to record the bill in our accounting software as soon as we receive it (Feb)?

 

[bklynboy]

Then its credit AP

 

[Anurag Maheshwari]

Hi Asset name should be "Advance For magazine subscription ".

 

[Hassan]

Then its credit AP

Ok Einstein. If it's Cr AP then what's Dr entry?
Don't tell me it's expense or prepayment because we make monthly accounts so can't record expense for all three months. And it can't be prepayment because we haven't paid as yet.

 

[bklynboy]

Just getting to this.....We use suspense or clearing in that case which is a miscellaneous asset - usually you do not record bills before due but if you do its an advance payment (like a deposit in rent where an asset gets created). We put in suspense so that we can track and make sure this gets cleared properly when paid. If easier offset to "Advances - Asset".

 

[Hassan]

Thanks for your help but I was asking for something else. Let me make my question simpler:

We use accrual method of accounting and we close our accounts on monthly basis.

Let's say it's 1st of January 2015 and I have received a bill of £9,000 for an online magazine subscription. The due date for the bill is 31st of August and it's for a period of 1 June 2015 to 31 August 2015 (3 months).
I want to record this bill in my accounting software Quickbooks so that I do not forget it and pay it when it's due. Please advise if below entries are correct to record transactions:

On receiving the bill (1 January 2015)
Dr. Asset 9000?
Cr. Liability 9000
(Since this bill is not a liability as yet so just to set off the affect of liability I debited the asset account as well)

Every Month End (June, July & August):
Dr. Accrued Expenditure 3000
Cr. Asset 3000??

On payment (31 August 2015):
Dr. Liability 9000
Cr. Cash 9000

If yes, please advise appropriate account name for the "Asset"?
If no, please advise correct entries.Thanks

 

[Samir]

Thanks for your help but I was asking for something else. Let me make my question simpler:

We use accrual method of accounting and we close our accounts on monthly basis.

Let's say it's 1st of January 2015 and I have received a bill of £9,000 for an online magazine subscription. The due date for the bill is 31st of August and it's for a period of 1 June 2015 to 31 August 2015 (3 months).
I want to record this bill in my accounting software Quickbooks so that I do not forget it and pay it when it's due. Please advise if below entries are correct to record transactions:

On receiving the bill (1 January 2015)
Dr. Asset 9000?
Cr. Liability 9000
(Since this bill is not a liability as yet so just to set off the affect of liability I debited the asset account as well)

Every Month End (June, July & August):
Dr. Accrued Expenditure 3000
Cr. Asset 3000??

On payment (31 August 2015):
Dr. Liability 9000
Cr. Cash 9000

If yes, please advise appropriate account name for the "Asset"?
If no, please advise correct entries.Thanks

The way I would handle it is this:

On receiving the bill (1 January 2015), enter the following transactions in advance:

Transaction dated June 1, 2015:
Dr. Asset Prepayments 9000
Cr. Liability Accounts Payable 9000

Transaction dated June 30, 2015:
Dr. Expense Account 3000
Cr. Prepayments 3000

Transaction dated July 31, 2015:
Dr. Expense Account 3000
Cr. Prepayments 3000

Transactions dated August 31, 2015:
Dr. Expense Account 3000
Cr. Prepayments 3000
Dr. Liability Accounts Payable 9000
Cr. Cash 9000

Depending on how you record the last cash/ap transaction, you should have some sort of reminder in your accounting package that a check needs to be written/bill needs to be paid. I always put advance dates on upcoming payments to keep from forgetting about them and it works very well.